Platform Consolidation- By moving their various networks onto one single platform, LSI could not only cross-promote more effectively, but they would be able to streamline their operations on the upcoming mobile app. By simplifying its registered user database, LSI could more effectively promote a wide array of their products, rather than just one network’s niche goods.
Threats:
Amazon.com, Inc. (NASDAQ:AMZN)– In what seems to be the case with nearly every business in operation today, Amazon represents LSI’s most glaring competitive threat. Since the online juggernaut has moved into the supply side of business with the appropriately named Amazon Supply, it is not too hard for one to imagine them jumping into the reverse logistics space as well. Continuing to build upon their warehousing footprint, it wouldn’t take long for Amazon to become a major competitor if they chose to.
EBay Inc (NASDAQ:EBAY)– Not only did EBay unsuccessfully try to enter into the reverse logistics market in 2005, they provide major competition to LSI in the Business to Consumer market. EBay, paired with Amazon, offer an uncomfortable amount of competition versus LSI’s growing Secondipity platform. While the Secondipity business is more focused on bulk and wholesale selling, it ultimately serves as a Business to Consumer outlet, a market that is dominated by Amazon and eBay.
Ritchie Bros. Auctioneers (USA) (NYSE:RBA)– Representing LSI’s most direct competition, Ritchie Bros. is also a wholesaler of many capital products and has recently expanded its internet presence. Going head to head with LSI’s TruckCenter.com business, Ritchie Bros. offers a heavy machinery and trucking focus, a niche LSI has only begun to target. Having acquired TruckCenter.com in 2011 for $9 million in cash, LSI has shown its interest in the space, but will have its work cut out going up against Ritchie Bros.
Valuations
| Company | P/E & FP/E | P/CF | 5 Yr PEG | 5 Yr Rev Growth | 5 Yr EPS Growth | Operating Margin |
| LSI | 25 & 15 | 18 | 0.77 | 15% | 24% | 16% |
| Amazon | NA & 76 | 58 | 4.45 | 34% | NA | 1% |
| eBay | 28 & 18 | 19 | 1.42 | 12% | 40% | 21% |
| Ritchie Bros. | 29 & 23 | 19 | 1.75 | 7% | 0% | 29% |
With eBay and LSI offering the only true EPS growth of the group, they stand out as the two best current investments. Despite Amazon’s 34% revenue growth, they have largely been unable to generate true profit from this growth. With their famously thin margins, Amazon continues its destruction of brick and mortar stores everywhere. However, with the stock near all-time highs, I would rather look at a more traditional investment in either eBay, or “eBay Junior,” LSI.
Holding the lowest P/E and Forward P/E of the group, while also having the lowest PEG — a sign of the company’s vast growth runway — LSI looks to be in a great position to outperform the market over the long-term. As they continue making new acquisitions, looking to expand their footprint globally and operationally, LSI has demonstrated its ability to pick up new market share. Following its acquisition of TruckCenter.com, a move that will help them compete against Ritchie Bros., I am very confident in LSI’s ability to fend off the smaller company.
All in all, with their recent GoIndustry DoveBid acquisition, a sticky business, a strong moat, and a market with immense growth potential, I believe LSI’s Forward P/E of 15 offers investors a tremendous buying opportunity. I truly believe LSI is the next “wholesaling eBay” — a niche home to huge growth potential — and one that the company already has a great head start in.
The article Why This Company Could Be the Next eBay originally appeared on Fool.com and is written by Josh Kohn-Lindquist.
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